Could your business save money in the long term by investing in a CHP system, instead of a natural gas boiler?
As you contend with volatile prices and a stretched budget, it can be difficult to justify large-scale energy investments right now. If you’re thinking about deploying Combined Heat and Power (CHP), you may found it difficult to forecast the costs involved in transforming your energy estate.
It can be especially complicated to decide whether installing a CHP system is a stronger choice in the long term than simply reinvesting in a traditional heating and power system. In our Economics of CHP guide, we explored the prices one company could expect if they swapped to CHP before the end of 2023. Read on to find out what this could look like – and how you can strengthen your business case with the data to prove CHP is the right choice for your organisation.
In our guide to the economics of Combined Heat and Power (CHP), we explored what reinvesting in a boiler could look like for a large manufacturer.
We assumed that they needed around 1MW of low-temperature heat per hour for their production processes. When their boiler reached the end of its life, they decided to reinvest in the same system. Over the first five years following installation, we estimated the total cost of running a boiler to meet their 1MW heat demand with a traditional system.
We also explored the alternative: what if the manufacturer decided to deploy a CHP system as part of a Discount Energy Purchase instead? We estimated that, purely comparing the costs of this system vs a standalone boiler, the CHP would cost more in the first five years following installation. So, on the surface, it looks like choosing a boiler is the more cost-effective option. But this isn’t the full picture.
The manufacturer doesn’t just need heat to run their business: they also require electricity. We assumed that they would need around 6,734,000kWh every year to operate as expected. Based on anticipated prices, we estimated the costs of importing electricity to meet this demand for the first five years following boiler installation.
We found that it was a significant addition onto the costs of running their new boiler. On top of this, it leaves the manufacturer open to the risk of volatile energy prices. If grid prices suddenly rose, they could end up paying more than expected, giving them little control over their long-term budget.
Alternatively, if they chose to invest in a CHP system, they could see no additional cost for electricity on top of the costs of running the system. Our forecasts demonstrated that by choosing to invest in CHP instead of reinvesting in a traditional boiler, the manufacturer could make significant savings.
So, the data is clear: switching to CHP at the end of your boiler’s lifetime could result in huge long-term savings for your business. And with your heat and power generation onsite, you could shield your organisation from unexpected volatility in future.
With significant long-term savings to be made, we know that deploying Combined Heat and Power can bring huge cost benefits to your business. And the good news is that, even if you’re finding it difficult to justify the short-term capital expenditure, there are still options to help you make the most of the opportunity.
There are several flexible financing options to support you in transforming your energy estate. Our Discount Energy Purchase option is funded in-house, giving you flexibility to invest with no upfront capital needed. All you’ll need to do is pay an agreed p/kWh rate for the power your CHP system generates during its lifetime, with rates typically set below grid prices.
Or, if you’re a food and drink manufacturer, our Flexible Term Agreement could offer you the flexibility to move your system every three years. So, no matter what your future looks like, we can help you to reshape your energy estate for maximum savings.
Our team of experts are happy to discuss what deploying a CHP system at your organisation could look like. Complete our simple form to tell us more about your energy ambitions, and get started on your journey to a cost-efficient source of energy.
Aaron Parker is Centrica Business Solutions' Head of CHP Sales, he supports customers across a range of industries - including public sector, pharmaceutical, food and beverage, hotels, leisure and manufacturing - to reduce their energy costs and carbon emissions. He has over a decade of experience within business development and two decades within engineering solutions.
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